One of the most common real estate investing concerns that the new investor has is, “What will I do or say initially when I actually get over to a seller's house?” This is new territory in the beginning for most new investors. With the right training, most people can take the first steps of finding the area to invest in, determining market values, determining who in their area to use for financing, and mastering their public records system without much pain. When it comes to talking to sellers, however, many first-time or new investors feel pressure, and fear. Eventually, this will be perhaps the second most fun part of the job after getting your check at closing.
When I started as a real estate investor, my main fear was that I would say something stupid to give away the fact that I really didn't know what I was doing. I had read almost every course on the market, and probably picked up a little from each one, but I still didn't know what the “rules” were when I entered the living room of the seller and started to discuss making a deal. Thankfully, your seller won't know what the rules are either, as they don't sell their home to investors every week.
When you have done this business for some time, you will realize that a house is a house. In other words, you'll know the common problems that most houses face, how to fix them, and what it will cost. For example, on houses older than 40 years, you can usually count on at least some floor rot underneath the bathroom and kitchens because of small water leaks over time.
Keep Your Seller Talking
What does differ from deal to deal, and what makes real estate investing so interesting, is the seller. Your real goal is to be a good listener and try to get the seller to talk. I always like to think of myself as an interviewer on some sort of real estate TV show. You want to ask them questions in such a way that it gets them to talk without it seeming like you are grilling them. Barbara Walters softer “warm and fuzzy” interview style that she sometimes uses is a good example.
Remember that the seller WANTS TO TALK TO YOU. They have responded to a Magnetic Letter Mailing that you sent, and they are eager to get their real estate problem resolved. Furthermore, the reason they are having a real estate problem is that they have problems in other areas of their lives. If you come across as friendly and polite, they usually will open up to you and tell you their problems. Think of yourself as a real estate therapist. I've had many deals where a good foundation was formed between the seller and myself by spending time listening to their problems, and working to come up with a solution that would benefit them and give us the profit we needed to make on the deal.
I have prepared a loose script (in the following section) to help you understand what I am saying to my sellers when I go into their homes. This script is not from one particular deal, but many deals, though I tend to follow the same formula. As I am writing this, I just returned from a seller's home, where I presented a written offer on the spot. This meeting is still fresh in my mind, and I think that this section should benefit those investors with “stage fright.” Note that the script examples are not meaningless hypotheticals. Rather, they are all based on conversations that I've had with sellers.
Show Up At The Door On Time
I always show up right on the time, never a minute late, or a minute early. To do this, especially with our traffic in Atlanta, I typically try to get to the neighborhood about 20 minutes early. I'll drive around and look for active listings to verify that I have the correct impression of what homes are selling for in the neighborhood.
I dress casually, but not too nicely. If the neighborhood (or my seller) is more working class, I may wear jeans, but usually I'll wear tan pants and a short sleeve polo type shirt.
Smile. “Hi, my name is Dave. I have an appointment to meet with Russina Wy.”
They'll smile and invite you in. “Thanks for taking the time to meet with me today. You mentioned that you work during the days, and I know it must be hard to get away during the week. I really do appreciate you taking the time to meet with me, and I believe that I really can be of assistance to you” This is basically just a comment to let them know that you appreciate and honor their time, and that you are not trying to come off like a big shot investor. I would lead straight from this sentence into a general question that might lead to more conversation. Your next comment should be aimed at something that they have in their home, or a photograph of an interest (sky-diving) that you also have an interest in and could bond for a few minutes. I used to have a stock back up plan in case I froze up. Usually, they will have something on display that you can comment on.
“What an interesting painting, did you do that yourself?” or “Those are great miniature houses, do you collect those… (they respond etc.) …I have an aunt that is crazy over those. She goes all over the state to shows to find them” or “You must love to garden. You have some really wonderful plants in the front yard …(they respond etc.)… My wife and I are planning on putting in some butterfly bushes this spring. Yours are really thriving out there.” or “You have a nice looking family there in that picture, 4 boys? I just had my first, a little girl, earlier this year.”
Kids are the best thing to talk about. Even if you don't have any, talk about your neighbors kids, or your sister's kids etc. This is a subject that people like to talk about. If they are military, always ask them where they were stationed, if they had to travel much, and what their favorite places to travel to were if they were in Europe or outside the country. This brief interlude of casual conversation before business shows them that you are a regular kind of person, not a cold-blooded weasel-like real estate investor that is out to steal their home away from them.
After several minutes (usually 3-5 at the most), begin to go to work. By this time, you have established with them that you are not a cold-blooded weasel, you have some similar interests with them, and you are a decent and kind person.
Begin to Ask Questions, But the Right Questions
1) “This seems like a nice area. How long have you lived in the house?”
“About 5 years”
2) “I noticed a lot of stores and things on the way in which must make it convenient to be in this area. When you sell your home, do you plan to stay in the same area?” (This is a good question because it often will get them to tell you their future plans, which are key. They may be leaving the state, or moving in with a boyfriend/parent or whatnot).
“No, I'm moving to Maine.”
“Wow, beautiful state from what I hear.”
“Yes, I grew up there.”
“Really, what brought you to Georgia, if you don't mind me asking?”
“A bad marriage. I was divorced 4 years ago, and received the house as part of the divorce settlement. It has bad memories for me, I want to sell it and move back as soon as possible.”
Hopefully, the above question gets you to the point of where they are going, and why they want to sell. Right now, we can tell that the seller is not thinking rationally about the house (bad memories), and that they are in a hurry, which means lower sales price.
3) When are you trying to get this closed by?
This is a good question, because if they have a super-specific date, this may tell us more about their financial or personal situation. For example, “I need to close by January 14th so that I can pay my federal tax liens against the property.” Or, “I'm wrapping up my husband's estate, and want to be out as soon as the probate is finalized, in around 6 weeks.” If they say, “No real date, I just wanted to find out what I could get for the house, or what the market would bear,” they may not really be motivated enough to strike the type of deal we need.
4) “I sell properties by putting my final and best price on the home. This seems more fair to my buyers, and makes the transactions I engage in stress free. Do you have a bottom line price on this home?”
Questions like this bring it down to a point. You can find out quickly what the seller is thinking on price, and whether you are close to making a deal.
5) After getting a price, if you can, ask how much they owe on the house. Then ask if they would be willing, if you could give them their price, to let you assume payments on the house for a period of a year, or two.
Always Have Your Contracts with You When You Go to Look at the House
The above script is not necessarily something that you should memorize word for word. It does demonstrate the importance of getting together with your seller, and establishing a warm relationship before you get into the tougher questions. Remember to try and stay away from questions that have an easy “yes or no” answer. You want to keep them talking for maximum success.
Also remember to be genuine and real. While all people are different, we are also alike in many ways. Even if the seller is from a totally different background from you, you are bound to have some similar interests that can create a bond and make them want to deal with you, and not your competition.